1. Field of the Invention
This invention relates generally to the remote matching of buyers and sellers of products and services (hereafter simply called products) and to the management of remote transactions and exchanges of information between pairs and groups of buyers and sellers. More particularly, although not exclusively, the invention relates to a new type of network architecture and to an implementation of this new network architecture to create an electronic marketplace for physical and virtual goods.
2. Related Art
Currently, purchases transacted remotely (for example, over the Internet via the World Wide Web) conform to the general client/server model. Namely, potential suppliers establish servers that make available databases of products and prices, and functionality to effect the sale of such products. Potential buyers then search for the servers of suppliers potentially with the relevant products. Acting as clients to each of these servers (see FIG. 1), the potential buyers then searches the pre-existing databases of products for the specific product that meets their needs. Once found and flagged, the server then effects the sale—establishing the identity of the buyer and his/her delivery and other preference, and taking billing details as required.
Although this approach works well with products that are easily specified by the potential buyer (for example books, compact music diskettes, and new cars) and that have a standard price and that are offered by a small number of suppliers, when it (the general client/server model) is applied to more complex supply and demand situations this approach is deficient in a number of way.
First, often there are multiple suppliers of products that meet the buyer's needs and often these products are available at different prices, are of differing quality, have slightly different characteristics, and/or are sold on different terms. In such situations, the resulting transaction(s) would be more efficient if the buyer were more easily able to compare the various offerings and to negotiate with each potential supplier the price and other terms.
Second, some products are in limited supply, and sometimes demand for such products outstrips supply. In such situations, the resulting transaction(s) would be more efficient if the seller were able to negotiate with all the potential buyers either publicly or in private.
Third, the client/server approach demands that each supplier provide a database of available products on a server. Assembly of these databases must be done speculatively so as to be available when the first potential buyer establishes contact. Assembling and maintaining such databases is expensive and time-consuming. For small suppliers (especially unincorporated individuals) speculatively creating databases of the products potentially available is prohibitively expensive and time-consuming. As a result, the buyer does not have access to all products potentially available and thus the resulting transactions are inefficient.
Fourth, even if a supplier does speculatively create and maintain databases of all products potentially available, the static nature of such databases precludes the dynamic adjustment of price and terms (for example, based on current market conditions). Once again, the result is inefficient transactions for the seller.
Fifth, each supplier must make potential buyers aware of their servers and the nature of the products available from them. For small suppliers (especially unincorporated individuals) creating this awareness (even via the “search engines”) is difficult and often ineffective. As a result, the seller is unable to reach all potential buyers and thus the resulting transactions are inefficient.
Sixth, with each supplier operating their own server there is considerable duplication of functionality combined with a disruptive lack of standardisation in this functionality, but more importantly in how the available products are described, organised, and presented to users. As a result, the buyer has a difficult task finding and comparing the available options which in itself is inefficient but also necessarily results in some inefficient transactions.
Seventh, in addition to duplicating functionality, each supplier must independently establish the identity of each buyer and must independently process transactions. Similarly each potential buyer must independently assess the trustworthiness of each potential supplier. Both of which result in considerable, unnecessary transaction costs.
Eighth, client/server approaches rely on the operation of the server. Although this approach makes communication efficient, if the server(s) fail for whatever reason, all transactions of all types are interrupted.
All these deficiencies lead to inefficient transactions which are neither in the best interests of the buyer or the seller.
A number of alternative ways of handling purchases transacted remotely have arisen in recent years to overcome these deficiencies. None of these alternatives, however, adequately address all eight deficiencies, and all of these alternatives bring their own additional deficiencies.
The first alternative follows a client/server notice board model. Similar to the more typical general client/server model, potential buyers act as clients to access pre-existing databases of products on a server. These databases are searched using one of the plurality of methods described above and the server effects the sale, if it is agreed (see FIG. 2).
The notice board model differs from the general client/server model in that products from a wide range of suppliers (including unincorporated individuals) are displayed. As a result, the same item is often available from a range of suppliers often at different prices. Potential buyers are able to determine which specific instance to buy from the price, the unstructured description provided by the supplier, and from the supplier's reputation as summarised by a score provided by those who dealt with the individual previously.
The notice board model attempts to address the first deficiency listed above (i.e. multiple suppliers) by displaying together all variants of a given product from the widest range of suppliers. This model fails to fully address the first deficiency, however, because although comparison of options is possible, direct communication between the buyer and each potential supplier is not supported. Thus, true comparison of the offerings is not possible, the appropriateness of the various suppliers can not be adequately judged, and negotiation to find the optimal price and terms is not possible. The result is inefficient transactions.
The notice board model does not attempt to address the second deficiency (the situation where there are multiple buyers for a product in limited supply) focussing instead on near commodity products (e.g. books, music, movies, and DVDs) in which supply will almost always outstrip demand.
The notice board model fails to address the third deficiency (the burden of assembling and maintaining the product databases). Although the operator of the server is not required to put in the required effort, this burden is transferred to the individual potential suppliers. Since the individual suppliers do not have the same tools nor the economies of scale potentially available to the server operator, the total amount of effort required to assemble and maintain the product database is thus increased. The fact that existing systems are having some success proves that some potential suppliers at least are not find the resulting burden prohibitive. Regardless, the cost of uploading the details of all products potentially available for sale is prohibitive for many potential suppliers and thus the buyer is not presented with the widest range of options and inefficient transactions result.
Similarly, the fourth deficiency is not addressed by the notice board model, rather it is simply side-stepped. The pre-existing database of products still requires manual editing to update prices and terms. Given that the task of maintaining the database is distributed to the individual potential suppliers, the total amount of effort required is increased.
With regard to the fifth, sixth, and seventh deficiencies, the notice board model is a significant improvement. Advertising/awareness building, search and transaction functionality, and security are all centralised—greatly reducing the collective burden and making the process much easier.
The notice board model, being a variant of the client/server model still suffers from the eighth deficiency (i.e. that the marketplace is vulnerable to complete shutdown if the server(s) or network connection(s) to the server(s) should fail).
In addition to the above deficiencies, the notice board model has an additional deficiency (the ninth deficiency of client/server approaches). Having each supplier operate his/her own server (as in the general client/server model) allows each supplier to tailor the presentation of his/her offerings in the manner that best conveys their relevant merits. By focussing on just commodity products and by standardising the way each offering is presented and by precluding direct communication between buyers and suppliers, the notice board model prevents such tailoring and is thus only relevant for very simple transactions.
The second alternative to the general client/server model follows a client-server auction model. Similar to the client/server notice board model, potential suppliers create their own entries in a central database of products. Potential buyers then act as clients to access this databases on a server, searching the databases using one of the plurality of methods described above. The server effects the sale, if it is agreed (see FIG. 3). Whereas the notice board model tends to concentrate on over supply with limited demand; the auction model tends to concentrate on over demand with limited supply.
The auction model has many of the strengths and deficiencies of the notice board model. Advertising/awareness building, search and transaction functionality, and security are all centralised, thus alleviating deficiencies 5, 6, and 7. In parallel, however, the burden of database assembly and maintenance is passed onto the individual suppliers without providing matching tools and thus exacerbating deficiencies 3 and 4.
Whereas the notice board model concentrates on over supply and thus addresses deficiency 1 but ignores deficiency 2. The auction model, on the other hand, concentrates on over demand and thus addresses deficiency 2 while ignoring deficiency 1. Similar to the notice board model, the auction model continues to suffer from the eighth deficiency (i.e. that the marketplace is vulnerable) and also suffers from the new deficiency (i.e. the ninth deficiency) in that suppliers are not able to describe adequately their offerings.
Essentially, both the notice board model and the auction model address some weaknesses of the general client/server model, while exacerbating others by 1) shifting the burden of work onto unskilled suppliers with inappropriate tools, and 2) not facilitating direct communication between the buyers and suppliers.
A third alternative to the general client/server model exists which employs “refinable products” are described in UK Patent Application No. 0009077.9. “Refinable products” can be combined with the general client/server model, the notice board model, and the auction model to increase the level of communication between buyers and suppliers so as to generate more efficient transactions. Although this enhancement goes some way to addressing the many deficiencies listed above, there is still the fundamental deficiency in all client/server applications that the process of creating and maintaining the database is laborious, the marketplace is vulnerable, and inefficient transactions get entered into because detailed negotiations between buyers and suppliers are either not supported or are not easy.
Recently, a fourth alternative has emerged. The peer-to-peer model forsakes client/server relationships and pre-existing database of products in favour of direct interaction between “buyers” and suppliers. Thus far only applied to the electronic sharing of files (in particular music files), the peer-to-peer model has been implemented in two forms.
In its purest form (for example, Gnutella), each potential “buyer” and supplier runs a peer application. The peer application announces its presence over whatever network it is attached to. Other peers receive and acknowledge the announcement and thus “knif” the new peer into a dynamic network of peers currently online. When a particular “buyer” wants a product, he broadcasts his request to the dynamic network of peers. Any peers able to fulfil the request get into direct contact with the requester. The requester then employs standard network protocols to download the relevant file from one of the potential suppliers.
In another form (for example, Napster), a central server is used to optimise performance and to ensure that all peers are able to communicate with all other peers. When a new peer application attaches itself to a network, it announces its presence (and its list of files available for transfer) to the server. When a particular “buyer” wants a product, he sends his request to the server, who replies with a list of all peers with the relevant file. As before, direct communication is then entered into individually between the requester and each potential supplier. Once a suitable partner is selected, the requester employs standard network protocols to download the relevant file from the selected supplier.
The peer-to-peer model overcomes many of the deficiencies of the client/server model. It elegantly handles both the case of over supply (deficiency 1) and of over demand (deficiency 2), yielding the most efficient transaction by allowing every “buyer” to communicate directly with every supplier.
Peer-to-peer handles the problem of database assembly and maintenance (deficiencies 3 and 4) by dynamically creating the database based on the peers currently online (Napster) or by having no database at all and instead simply allowing each supplier to respond to each request as it appears (Gnutella). In both cases software is provided to automatically search the local hard drive for relevant files, thus automatically assembling the supply databases.
Peer-to-peer handles the problem of awareness building/advertising (deficiency 5) by routing requests automatically and thus there is no need for the “buyer” to know the specific peers who might have the desired product.
Although there is duplication of functionality (deficiency 6), this duplication does not give rise to a disruptive lack of standardisation as every peer is using the same software and thus products are categorised and described similarly.
The peer-to-peer model (in its pure form, not the form promulgated by Napster) overcomes the problem of catastrophic failure (deficiency 8) by not having any node in the network any more important than any other node. The peer-to-peer model, however, completely fails to address the issue of security (deficiency 7).
Unfortunately, despite all these improvements. Existing peer-to-peer models have several very significant deficiencies.
First, because peer-to-peer transactions involve any two peers getting into contact with each other, the effort required in each transaction to certify the other peer's identity and to then establish the necessary trust with the other user is greatly increased. At least with the client/server models one of the two parties (i.e. the server) is known (although not necessarily trusted). With peer-to-peer, it is likely that both parties are unknown and could be essentially untraceable.
To date this hurdle has been insurmountable in practical terms and thus no existing peer-to-peer systems work with money (electronic, physical, or otherwise). In addition, no existing peer-to-peer systems work with physical goods. The “buyer” pays nothing for what is supplied.
Second, in a similar vein, because peer-to-peer transactions involve only two parties, no mechanisms exist to exchange funds electronically. Although, in theory cheques could be sent through the post (or goods could be sent in a swap exchange), the inherent problems of trust (see above) have discouraged such practices to the point that it is not done. Again, the result is that no existing peer-to-peer systems work with money (electronic, physical, or otherwise) or with the exchange of goods (electronic, physical, or otherwise).
Third, existing peer-to-peer networks only relate to peers connected to the peering networked at the time and peer-to-peer networks have no memory. Thus, peers not connected are not represented. With pure peer-to-peer networks, the effective size of the network is narrowed further to just those peers who are reached in seven “steps”. Given that the receiver of each message can only pass it to seven others, and that the message can only be passed seven times, and that there can be considerable overlap between the “others to forward messages to” list of friends, the effective size of each peer's network can be very small indeed.
As a result, the “buyer” does not have access to all products potentially available and the supplier does not have access to all potential “buyers”, and thus if money were being exchanged the resulting transactions would be inefficient.
Fourth, because existing peer-to-peer networks only cater for transactions involving no money and because “buyers” are only able to view the products available from those who are online at the present time, existing peer-to-peer networks have been forced to concentrate solely on electronic exchanges (e.g. music files). The result is that no existing peer-to-peer systems work with physical products. If it can not be transferred electronically, then it is ignored.
Fifth, by definition peer-to-peer exchanges involve just two peers. Although this facilitates individual negotiation, it precludes auctions and other group negotiation mechanisms. This preclusion arises not only from the definition of peer-to-peer (i.e. that it involves only two peers), but also from the fact that there is no mechanism for any other peer (or server or any other third-party) to manage an auction, for example. The result is a radically curtailed set of negotiations. Given the existing concentration on free electronic transfers, this limitation is not a problem. However, if money were being exchanged, this limitation would be very significant.
Sixth, also by definition peer-to-peer exchanges involve two peers of equivalent capability and responsibility. No existing peer-to-peer networks cater for mobile phones, palm tops, or other “weak” peers. Similarly, no existing peer-to-peer networks take advantage of the unique capabilities of particularly powerful PCs (or other “strong” peers).
Seventh, to date no one has found a way of making money from operating a peer-to-peer network. Without a reward for the host of such a network, their development will remain limited and non-peer-to-peer alternatives will always be touted as superior.
Eight, because there are no central services in true peer-to-peer networks, the same message must be passed numerous times around the network to ensure that each peer of potential relevance receives a copy. Such an approach generates considerable bandwidth, which can makes peer-to-peer networks slow and expensive to operate.